In rejecting a proposed settlement in Silicon Valley’s closely watched ‘no hire’ case, District Judge Lucy Koh said on the weekend there’s strong evidence that Steve Jobs was a central figure, if not ‘the’ central figure, in the alleged conspiracy to suppress workers’ wages.

The case involves allegations that seven of Silicon Valley’s biggest companies, including Apple, Google, Intel and Adobe Systems, had secret agreements in place not to poach each others’ workers. That would be a violation of the Sherman Antitrust act and would limit the chance for workers to increase their salaries by switching jobs.

Last year, three of the accused companies – Intuit, Lucasfilm and Pixar – settled the case by paying damages to the affected class of workers. The other four companies fought on, until in April they reached a separate settlement that required Judge Koh’s approval.

She refused to approve it on Friday (local time), saying the amount was too low. The proposed settlement is for US$324.5 million, but once the attorneys collect their fees of about US$81 million, the workers each would get only US$3,750.

What troubled the judge, in large part, was that it’s a smaller settlement than the one reached with the other companies last year – even though the evidence presented since then means the workers are in a much stronger position. If the two sides can’t reach a settlement that Koh will approve, the case could go to a trial that might reveal even more about hiring practices in the Valley.

Last week, Koh recounted that evidence, much of which has already been made public, and concluded there is “substantial and compelling evidence” that Jobs was “a, if not the, central figure in the alleged conspiracy.”

Google co-founder Sergey Brin, for instance, has testified: “I think Mr. Jobs’ view was that people shouldn’t piss him off. And I think that things that pissed him off were – would be hiring, you know – whatever.”

When Jobs heard Google was trying to recruit employees from Apple’s Safari team, Brin testified, the Apple boss threatened him, stating: “If you hire a single one of these people, that means war.”

Eric Schmidt, Google’s executive chairman, has said Jobs “believed that you should not be hiring each others’ … technical people.”

On one occasion, Koh wrote, Google fired a recruiter for trying to hire a worker from Apple. Schmidt wrote to Jobs and apologised, informing him of the termination, and Jobs forwarded the email to Apple’s human resources department, along with just a smiley face.

Other CEOs maintained the no-poaching deal out of “fear of, and deference to, Mr. Jobs,” Koh wrote. Former Adobe CEO Bruce Chizen, for example, said he worried that Jobs would “deliberately poach Adobe just to prove a point.”

The evidence that’s been collected related to Google is “equally compelling,” Koh wrote. Schmidt, Jobs and Intuit Chairman Bill Campbell were “key players in creating and enforcing the anti-solicitation agreements,” she wrote in her order.

For example, emails show that Schmidt “terminated at least two recruiters for violations of anti-solicitation agreements, and threatened to terminate more.”

There is also compelling evidence against Intel, Koh said, and evidence that Adobe was “aware of the impact of its antisolicitation agreements.”

Given the strength of the evidence, Koh apparently thinks the workers’ attorneys should push for a bigger settlement or take the case to trial. One expert hired for the case has estimated the workers’ compensation should be as high as US$3 billion, she noted. And that amount could be trebled under antitrust law if the workers won their case.

She has called a case management conference for 10 September, where she’ll meet with the attorneys and decide how to proceed.

One Comment

I don’t expect many to agree with me but I see a difference between not actively recruiting from each other and not hiring someone who works for the opposition. My understanding of the situation (which may be incorrect) is that the agreement was not to not hire each others workers but to not actively seek them out. If this is true then the workers were able to apply for jobs advertised at the other companies involved in the agreement.
My view is that it was an attempt to stop active pursuit of trade secrets (and not the suppression of wages) where there appears to be little remedy for theft of intellectual property in the courts, as demonstrated by other cases involving this judge.